ArcelorMittal: Another majestic French misunderstanding of economics
SO. The French are threatening to nationalise a steel plant to stop the eeeevil capitalist bastards closing it down. And even I would agree that there are times that governments should prevent capitalists from doing certain things. But it would help if the government understood even the first thing about what it is doing: something which isn’t true for the French government in this case:
Francois Hollande has threatened to nationalise a plant owned by steelmaker ArcelorMittal in an increasingly heated dispute in which a minister has said the multinational is no longer welcome in the country.
Here’s the fiddly little technical bit.
That steel plant has two parts to it. One is a couple of blast furnaces. These are what we use to turn iron ore (and coke and limestone) into iron and steel. The other is a rolling mill, which is what turns great big blocks of steel into the sheet that we actually use (to build cars in this case).
Arcelor Mittal wants to keep the rolling mills open and close the blast furnaces. The other various people who would like to buy the site (off the government, if it does nationalise it) want to do the same.
So, err, WTF eh? Why keep a rolling mill going when you’re not making iron from ore to feed through it?
Essentially, it’s because the hippies have won.
You see, we can also make those great big blocks of iron by melting down old scrap steel. And we do: and we do that much more now than we used to in the past. Because, you know, we’re all recycling more just like the hippies have been screaming we must.
So, we recycle now, rather than use iron ore. Thus we don’t need a blast furnace any more: we use a very different and much cheaper type of furnace to melt the scrap.
And that’s it really: our only problem now being that the French government doesn’t seem to know this. They want to keep the blast furnaces open even though there’s absolutely no good reason for their existence any more: because the hippies have won.
Photo: Riot policemen surround demonstrating workers from Arcelor Mittal in front of the National Assembly in Paris, Wednesday Nov. 28, 2012. French President Francois Hollande met with the chief of Arcelor Mittal on Tuesday, after a Socialist government minister suggested that the steel giant should be ousted from France. Industrial Recovery Minister Arnaud Montebourg drew praise on the political left after accusing the company of lying to the government amid its plan to shutter a blast furnace in the northeast town of Florange. Sign reads: Arcelor Mittal the Shadow of Death of Steel Industry.(AP Photo/Remy de la Mauviniere)